All intellectual property is linked to prior invention, knowledge, and creativity. Often enhancing an old technology generates valuable new inventions, or adapting an old artistic tradition results in new creative works. IP builds upon IP, creating new industries, businesses, markets and wealth creating opportunities.
Throughout history, intellectual property has played a big role in building new industries. One of the earliest and most significant was the printing press, invented by Johannes Gutenberg around 1440. That IP also the created the copyright system, on which trillions of dollars of IP is created and licensed including books, magazines, art, movies, TV shows, and millions of other copyright IPs around the world.
Many companies recognize the more that others build upon their IP, the bigger their market grows. Brand licensing is one example. This strategy enables companies whose brands have high consumer recognition to unlock a its latent value and take advantage of demand for non-competitive products. Apple’s iPod is a brand (and product) that created an immediate need for accessories. Since these accessory products were not core to Apple’s business, they used licensing to meet the demand for these accessory products, and benefit from the incremental revenue. Licensing the IPod brand provided great opportunities for savvy companies to produce all kinds of terrific products to make the iPod more user-friendly and enhance the listening experience. By letting other companies “build” upon the brand, Apple expanded it’s market into a variety of new product categories including electronics, docking stations, wireless receivers and more.
Open innovation licensing is another strategy that builds upon IP to push new technologies into the marketplace. It focuses on sharing IP technologies to cut costs, accelerate development, increase market acceptance, and introduce new products faster. It gives low-cost or no cost access to the IP so others can collaborate, adopt and use it to create new products, services and other IPs.
Just recently, Tesla announced that all its patents were available to other car companies to use in “good-faith”. Tesla is letting others use it’s IP to help advance electronic vehicle technology, which helps build their market. Toyota did the same thing. They provided royalty free licenses to about 6000 patents relating to hydrogen fuel cells. The strategy is helping them build the market for hydrogen powered cars.
Creating new products by allowing outside companies to use your IP is another open innovation strategy. Over the last decade, companies have realized that they do not have a monopoly on the best ideas, and/or that it is really expensive to keep research and development teams in-house. Proctor and Gamble, IBM and Kimberly Clark are examples of companies using this strategy as a way of driving innovation. For example, since 2008 over half of Procter & Gamble’s new product offerings have come from outside the company. The results include new products such as Mr. Clean Magic Eraser and Pringles Prints.
Open innovations speeds up processes and reduces time to market. Kimberly Clark reduced the time is takes to bring out new products by 30% through open innovation. In 2005, it partnered with more than 30 companies through joint-development, joint ventures, co-distribution, and licensing deals. It launched Sunsignals (kids UV protection monitor) in just six months by collaborating with a smaller company, SunHealth Solutions.
Some intellectual property becomes a standard for other industries to build and sell products derived from their IP. Computers, smart phones and tablets often need thousands of IP rights, most of which are not owned by them. These industry standard IPs, which are often patents, are licensed as a “pool of rights” at a low royalty rate. It enables manufacturers to use these IPs to make and sell products at a competitive price. In return, these industry standard IPs receive a royalty on every product sold by these manufacturers.
Innovation and intellectual property are moving from a closed traditional R&D approach to an open collaborative innovation process. Open innovation speeds up processes, reduces costs, introduces more creative ideas, and reduces time to market. Whether its expanding a brand, launching a new product, or speeding new technology adoption , more and more businesses in every industry are using an open innovation licensing model to build upon their IP and keep pace with today’s rapidly changing marketplace.